Do You Need Employment Practices Liability Insurance?
Also known as EPLI, employment practices liability insurance is designed to protect small businesses in the event an employee files a lawsuit claiming harassment, discrimination or another such wrongdoing. It’s a worthwhile investment; employment practice lawsuit settlements can cost businesses millions of dollars. Even cases that are unsuccessful result in expensive legal defense fees—and, more often than not, damage to your company’s reputation. As such, an EPLI policy should be part of every small business risk-management strategy.
Employment Practice Liability Insurance Basics
An EPLI policy will protect your business—including your directors, managers and employees—from lawsuits filed by prospective, current or former workers. This type of policy has fewer limitations than the typical directors’ or officers’ insurance policy. Covered claims generally include sexual harassment, slander and libel, invasion of privacy, emotional distress, discrimination, wrongful discipline or termination, negligent hiring, breach of employment contract, and mismanagement of employee benefit plans. Common exclusions include property damage, bodily injury and intentional/dishonest acts.
Your annual premium for an EPLI policy depends on a number of factors including your company’s size, the industry you’re in, your turnover rates and a risk profile. The insurer you choose may ask to review your written personnel policies before providing you with an EPLI quote. If your company has been sued over employment practices in the past or has policies deemed to be risky, you will pay a higher premium for coverage.
Your employment practices liability insurance policy will include a deductible that you must pay out of pocket before the remainder of any claim is covered. Once you’ve met the deductible, the policy will reimburse your company for costs incurred defending a lawsuit in court as well as any judgements and settlements—up to the policy limit. EPLI policies generally do not cover punitive damages or civil or criminal fines. Depending on the policy you choose, you may have limited coverage during events such as mass layoffs, mergers or acquisitions.
Coverage will generally be limited to a predetermined amount between $1 million and $25 million depending on the amount of coverage you’ve chosen. Legal defense costs, judgements and settlements all contribute to the limit. Your insurance agent can help you determine how much EPLI coverage you need based on the particulars of your business.
Your policy may require you to allow your insurance company to choose the attorney you use should a claim ever be filed. If you prefer to work with an attorney of your own choosing, you must make sure such a clause is included in your EPLI policy.
Are you confident your current small business insurance package will protect you from employment practice claims? If not, give us a call to review the policies you have in place today.